Correlation Between United Fire and Senmiao Technology

Can any of the company-specific risk be diversified away by investing in both United Fire and Senmiao Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining United Fire and Senmiao Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Fire Group and Senmiao Technology, you can compare the effects of market volatilities on United Fire and Senmiao Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in United Fire with a short position of Senmiao Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Fire and Senmiao Technology.

Diversification Opportunities for United Fire and Senmiao Technology

0.12

Correlation Coefficient

United Fire  Senmiao Technology

Average diversification

The 3 months correlation between United and Senmiao is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding United Fire Group and Senmiao Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senmiao Technology and United Fire is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on United Fire Group are associated (or correlated) with Senmiao Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senmiao Technology has no effect on the direction of United Fire i.e., United Fire and Senmiao Technology go up and down completely randomly.

Pair Corralation between United Fire and Senmiao Technology

Given the investment horizon of 90 days United Fire Group is expected to generate 0.44 times more return on investment than Senmiao Technology. However, United Fire Group is 2.25 times less risky than Senmiao Technology. It trades about 0.05 of its potential returns per unit of risk. Senmiao Technology is currently generating about -0.02 per unit of risk. If you would invest  2,821  in United Fire Group on December 28, 2024 and sell it today you would earn a total of  145.00  from holding United Fire Group or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

United Fire Group  vs.  Senmiao Technology

United Fire Group

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Fire Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, United Fire may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Senmiao Technology

Risk-Adjusted Performance

Weak

Over the last 90 days Senmiao Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, Senmiao Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Fire and Senmiao Technology

The main advantage of trading using opposite United Fire and Senmiao Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Fire position performs unexpectedly, Senmiao Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Senmiao Technology will offset losses from the drop in Senmiao Technology's long position.

The idea behind United Fire Group and Senmiao Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.